Commercial Lending: Market Calm After Volatility?

 

  • Following investors’ growing anxiety over rising interest rates and slower corporate earnings growth, equity market volatility culminated in a late-December price correction and increased corporate bond spreads.

 

  • Commercial lending activity was strong in Q4. The CBRE Lending Momentum Index closed at a value of 253 in December, slightly ahead of September’s close.  

 

  • CMBS issuance totaled $77 billion for the year, down from $87.8 billion in 2017.

 

  • Despite some anticipated softness in CMBS conduit lending, many banks and life companies have ample capital to allocate toward commercial mortgages.

 

  • Overall average LTV ratios were slightly lower in Q4, while debt yields and underwritten cap rates rose.